EPA Arrives Late to the Ethanol Party

It seems that government clean energy regulation continues to misguide industries, like the subsidized growth of ethanol. This week the EPA unveiled the 2008 Renewables Fuel Standard (RFS), raising the minimum amount of ethanol in U.S. gasoline to 4.66 percent, or 5.4 billion gallons, of renewable fuels required to be blended into transportation gasoline, from 4.02 percent, or roughly 4.7 billion gallons, in 2005.

This do-nothing regulation comes as U.S. ethanol production capacity is at over 7 billion gallons a year and growing. With oil prices so high and ethanol prices so low, gasoline blenders are often using as much ethanol as possible. Ethanol and corn lobbyists have joined forces to push for more ethanol mandates in the sagging Energy Bill, while an unlikely consortium of livestock farmers, packaged-food makers, environmentalists, oil industry lobbyists and international food security critics have come together to keep those amber waves of grain in check.

The RFS is currently legislated to increase to 7.5 billion gallons by 2012, just slightly higher than current production capacity. However, ethanol proponents are hoping that as Congress struggles to find a compromise between the Senate and House versions of the Energy Bill, ethanol mandates could triple. Top ethanol lobbyist Bob Dinneen is “reasonably confident” that Congress will raise the renewables mandate, according to The Wall Street Journal.

The entire situation is horribly out of sync as lobbyists on all sides form unholy alliances and work toward overlapping goals for duplicitous reasons. The oil industry and the livestock, meat and poultry groups have found a common lobbyist in former Texas Congressman Charles Stenholm, who wants to limit ethanol and push down corn prices. Corn growers (dealing with record-high crop values) have joined forces with ethanol producers (who are seeing profits plummet) to ensure a growing future for biofuels.

Meanwhile the environmental efficacy of ethanol, corn or cellulose, is still being debated and world leaders are calling America’s increasing use of food as fuel “sinister.”

The Senate passed a version of the Energy Bill that would require gasoline blenders to use 36 billion gallons of renewable fuels by 2022, up to 15 billion gallons of which could come from corn. The remainder would come from the massively unproven cellulosic ethanol industry, which is still awaiting its breakthrough. This is all good for corn and ethanol, but the implications all of the players lobbying for their interests is uncertain.

The biofuel industry is extremely young, having grown 80 percent in the last two years alone, and it will continue to experience growing pains as production models are smoothed out. The Energy Bill legislation would last years, potentially reinforcing economically and environmentally unsound practices as America’s fuel economy moves in a wildly unsustainable direction.

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